December 10th, 2021 by admin
Bankruptcy Filing Increases
The IACC reports that, total US bankruptcy filings in October tend to increase in the 4th quarter of the business year. Specifically, commercial business filings tend to increase even further in the 1st quarter of the following business year, with the majority of those occurring in the month of January.
While 92% of small business owners say they have never filed for bankruptcy, many revealed they lack key business insurance policies that could pay for lawsuits and incidents that often lead to bankruptcy, according to a recent survey.
Highlights from the survey results include:
92% of respondents haven't filed for small business bankruptcy.
Of the 8% who did file for bankruptcy:
- 51% filed for Chapter 7 (liquidation)
- 27% filed for Chapter 13 (reorganization for sole proprietors)
- 22% filed for Chapter 11 (reorganization)
Of the 8% who filed for bankruptcy:
- 64% filed because of personal issues
- 18% filed because of lost customers
- 18% filed because of lawsuits
98% of respondents were not concerned that they will need to file for bankruptcy in the next six months.
Business bankruptcies are on the rise
Only 8% of small business owners surveyed have filed for bankruptcy. However, business bankruptcy filings nationwide are on the rise. Commercial bankruptcy filings increased by 26% in 2020, according to a report by the American Bankruptcy Institute. A total of 37,771 businesses filed for bankruptcy that year.
Most respondents who filed for bankruptcy did so for personal reasons (64%). The poll also revealed 51% opted for Chapter 7 liquidation (no asset filing). This could mean that personal reasons for filing for bankruptcy also led to the decision to shutter their business rather than restructure their debt.
The remaining 49% opted for either Chapter 11 or Chapter 13, which allows business owners to restructure and repay debt while keeping their business open. 18% who filed for bankruptcy did so because of a lawsuit.
Most report their Bankruptcy filing coincided with the end of the current business year (December) / beginning of the next business year (January), based upon a decision on whether to keep the business open.
Since most business-to-business transactions occur via a Line of Credit being extended, normally, neither Party is Secured in any way, shape, or form. If you are carrying delinquent Customer balances on your aging at the end of the year, make sure you are in touch with those customers to get paid as they may be strongly considering, closing shop, and filing for Bankruptcy.
For more information Contact C2C Resources
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